"GLOUCESTER, Mass.--(BUSINESS WIRE)--May 11, 2000--Cyrk, Inc. (Nasdaq: CYRK), a global leader in the promotion industry, today announced results for the first quarter ended March 31, 2000 and a restructuring of the Company's promotional product business.
Revenues for the first quarter of 2000 increased 11 percent to $177.3 million from $159.1 million for the same period a year ago. First quarter 2000 net loss available to common stockholders was $918,000, or $(0.06) per diluted share, compared with a net loss available to common stockholders of $3.2 million, or $(0.21) per diluted share for the first quarter of 1999. The Company noted that the first quarter net loss includes a gain of $3.2 million, or $0.11 per diluted share, attributable to the sale of an investment in Exchange Applications (Nasdaq:EXAP).

"Additionally, the Company announced that, pursuant to a plan approved by its Board of Directors, it would take a second quarter pre-tax charge estimated to be in the range of $7 million to $9 million for restructuring and nonrecurring expenses. The costs relate principally to involuntary termination costs, the settlement of lease obligations and asset write-downs. The Company plans to eliminate approximately 175 positions, or 15 percent of its domestic workforce. The restructuring plan is anticipated to be substantially complete by the end of the current fiscal year, and is expected to yield annualized savings of $12 million to $15 million.

"Commenting on the restructuring plan, Allan Brown, co-chief executive officer of Cyrk, said, "We have responded aggressively to our business challenges by completing an in-depth review of our operations. We have concluded that an integration of our operations will result in greater efficiencies and enhanced customer delivery. We strongly believe that by quickly implementing cost reductions and process improvements, Cyrk will be better positioned to excel in an increasingly competitive marketplace." Last month Mr. Brown assumed responsibility of the global operations of Cyrk's promotional products divisions in addition to his ongoing management oversight of the Company's successful Simon Marketing subsidiary. The realignment was instituted to integrate and streamline the multi-divisional operations of the Company's promotional products business, and to enable the Company to optimize its Internet opportunities.

"Commenting on the first quarter results, Nick Mammola, Cyrk's chief financial officer, said, "First quarter results are attributable to the absence of custom product programs such as the Ty business. Our previous guidance on the first quarter was in anticipation of this situation and, accordingly, the results are in line with our expectations. The contribution of Ty business last year was a major driver of our profitability. In light of the uncertainty in 2000 surrounding the overall volume of our custom products business, we have responded by intensifying our focus on our predictable and replicable lines of business and our proprietary offerings in the Internet space."

EDGAR Online SEC Filings - May 11, 2000 12:50

"The following is a discussion of the financial condition and results of
operations of the Company for the three months ended March 31, 2000 as compared
to the same period in the previous year. This discussion should be read in
conjunction with the Consolidated Financial Statements of the Company and
related Notes included elsewhere in this Form-10Q.

"From time to time, the Company may provide forward-looking information such as
forecasts of expected future performance or statements about the Company's plans
and objectives, including certain information provided below. These
forward-looking statements are based largely on the Company's expectations and
are subject to a number of risks and uncertainties, certain of which are beyond
the Company's control. The Company wishes to caution readers that actual results
may differ materially from those expressed in any forward-looking statements
made by, or on behalf of, the Company as a result of factors described in the
Company's Amended Cautionary Statement for Purposes of the "Safe Harbor"
Provisions of the Private Securities Litigation Reform Act of 1995, filed as
Exhibit 99.1 to the Company's first quarter 1999 Report on Form 10-Q which is
incorporated herein by reference.

"The Company is a full-service promotional marketing company, specializing in the
design and development of high-impact promotional products and programs. The
majority of the Company's revenue is derived from the sale of products to
consumer product companies seeking to promote their brand and build customer
loyalty as well as products sold to consumers under certain license agreements.

"The Company's business is heavily concentrated with McDonald's Corporation
("McDonald's"). Net sales to McDonald's accounted for 61% of total net sales in
1999 and 68% of total net sales in the first three months of 2000.

"The Company's business with McDonald's (as well as other promotional customers)
is based upon purchase orders placed from time to time during the course of
promotions. There are no written agreements which commit them to make a certain
level of purchases. The actual level of purchases depends on a number of
factors, including the duration of the promotion and consumer redemption rates.
Consequently, the Company's level of net sales is difficult to predict
accurately and can fluctuate greatly from quarter to quarter. The Company
expects that a significant percentage of its net sales in 2000 will be to
McDonald's.

"In September 1999, the Company agreed with McDonald's that the Company would no
longer provide administrative services in connection with McDonald's promotional
programs in Europe effective January 1, 2000. The fees for these services have
historically not been material to the overall results of operations. This action
has an adverse impact of $150 million to the Company's sales levels. However,
because the agreement with McDonald's related to these services did not provide
for significant gross margin on associated sales, the Company believes that the
absence of these sales will have no material adverse effect on the Company's
profitability.

"In December 1997, the Company entered into a license agreement ("the Agreement")
with Ty Inc. ("Ty") which granted the Company the exclusive right to develop and
market licensed Beanie Babies products in connection with the Beanie Babies
Official Club, a consumer membership kit. In May 1999, the parties mutually
agreed to modify the Agreement and to enter into a new arrangement in which the
Company's rights in connection with the Beanie Babies Official Club became
non-exclusive in order to enable Ty to market and distribute Beanie Babies
products in connection with the Club and in cooperation with the Company
commencing in July 1999. Under this arrangement, which extended through the end
of 1999, the Company provided creative and sourcing services for Ty in
collaboration with Ty. In 1999, the Company's seasonal pattern of sales and
earnings, including a loss in the first quarter, and significant revenues and
profitability in the second half of the year, was primarily attributed to the
sale of Ty Beanie Babies product. Sales of Beanie Babies related products
accounted for 11% of total net sales in 1999.

"Effective January 1, 2000, the Company is a strategic marketing agent for Ty
and will provide Ty advisory, design, development and/or creative services on a
project by project basis, primarily in the second half of the year. Given the
nature and the timing of the service arrangement, the Company's future revenues
and earnings associated with the Ty relationship are difficult to predict.
However, the Company expects sales of Ty-related products in 2000 to be
substantially less than the 1999 volume.

"As a result of the absence of sales associated with Ty-related business and
consistent with the seasonal nature of other client promotional activity, the
Company expects to incur an operating loss for the first half of 2000."